Trust Funds

Viewing 5 posts - 1 through 5 (of 5 total)

kateej03
Participant
@kateej03
Join Date: 2011
Post Count: 112
August 31, 2011 - 6:05 am
Hi,
Is someone able to explain a bit more about how trusts help with finance? In Steve's book he mentions you can borrow more money using a trust as you dont have to disclose any debt you owe personally, however I have read a forum where someone said this is not the case.
Can anybody shed some light?
Thanks,
Kate
mike h
Participant
@mike-h
Join Date: 2005
Post Count: 18
August 31, 2011 - 7:06 am
Hi Kate,
My understanding is that it’s incorrect.
The reason is that the bank will require the trustee to guarantee any loans to the trust. If you have a corporate trustee, the director will be required to personally guarantee the loan. I believe this would still show up on your credit history.
Coli
Participant
@coli
Join Date: 2009
Post Count: 19
August 31, 2011 - 7:06 am
Hi Kate,
Under recent consumer credit laws introduced throughout Australia the loophole of not declaring debt that you guarantee, such as trusts, companies etc. has in real terms been closed. At best, while it was technically possible in the past it was still borderline. When Steve wrote the lastest book he was 100% technically correct, however as with many areas of finance the rules can change daily.
In essence, if you cant show in at least some way how you will service the debt once all debts and guaranteed debts have been factored in then you are unlikely to be able to borrow further without committing fraud.
Fraud = Jail. No investment is worth that.
On how trusts help with finance, this is a case by case basis. In fact the statement that trusts help with finance is not correc. They can help in some instances but hinder finance applications in others. You need to speak to a licenced credit advisor about what the borrowing capacity and possibilities are for your individual situation.
One size does not fit all when it comes to finance.
Cheers
kateej03
Participant
@kateej03
Join Date: 2011
Post Count: 112
August 31, 2011 - 7:18 am
Thank you that's a big help!
Terryw
Participant
@terryw
Join Date: 2001
Post Count: 16,213
September 1, 2011 - 12:05 am
Technically trusts should hurt the ability to borrow.
Imagine you had a discretionary trust with $100,000 pa income and you were on a wage. The trustee of a discretionary trust as absolute discretion on who to pass this income to. So there is no guarantee that the income would come to you. Even if you are trustee there is still no guarantee you will be the beneficiary.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au